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INCOME TAX (Tables)

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Schedule of Components of Income Taxes

A. Taxes on income included in the statements of income:

		US dollars
		Year ended December 31,
(in thousands)		2020				2019				2018
Income taxes (tax benefit):
Current taxes:
In Israel			5,841				6,155				6,622
Outside Israel			4,341				7,674				8,325
			10,182				13,829				14,947
Deferred taxes:
In Israel			(553	)			299				781
Outside Israel			(1,605	)			(2,545	)			1,565
			(2,158	)			(2,246	)			2,346
Taxes in respect of prior years:
In Israel			2,751				439				(20	)
Outside Israel			81				212				-
			2,832				651				(20	)
			10,856				12,234				17,273

F - 40

ITURAN LOCATION AND CONTROL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

NOTE 17 -      INCOME TAX (cont.)

A. Taxes on income included in the statements of income (cont.):

(*) During November 2020, the Company has received from the Israeli tax authority ("ITA") tax assessments for the years 2016-2018 amounting to approximately NIS 13 million (approximately US$ 4 million). An amount of approximately NIS 6 million (approximately US$ 2 million) due to the timing differences (out of this amount, approximately NIS 2 million were claim in the tax assessment for the year ended December 31, 2019) related to the deduction of certain expenses for tax purposes, which was agreed to be deducted in the coming years. Accordingly, the Company recorded an amount of NIS 9 million (approximately US$ 3 million) as tax expense related to prior periods and a deferred tax benefit in a similar amount. In addition, the Company was required to pay the ITA an amount of NIS 2 million (approximately US$ 0.5 million) as interest expense. Such amount was recognized as part of financing income, net.

Schedule of Income Tax Reconciliation

J. The following is reconciliation between the theoretical tax on pretax income, at the applicable Israeli tax rate, and the tax expense reported in the financial statements:

		US dollars
		Year ended December 31,
(in thousands)		2020				2019				2018
Pretax income			29,039				23,204				76,233
Statutory tax rate			23	%			23	%			23	%
Tax computed at the ordinary tax rate			6,679				5,337				17,534
Nondeductible expenses (income)			2,220				3,117				(2,785	)
Losses in respect of which no deferred taxes were generated (including changes in valuation allowance)			(47	)			-				(236	)
Deductible financial expenses recorded to other comprehensive income			470				297				(177	)
Tax adjustment in respect of different tax rates			753				3,045				2,384
Taxes in respect of withholding at the source from royalties and dividends			-				725				31
Adjustment in respect of tax rate deriving from “approved enterprises”			(1,583	)			(128	)			(100	)
Tax related to previous years			2,832				651				(20	)
Others			(468	)			(810	)			642
			10,856				12,234				17,273

Summary of Deferred Taxes

Composition:

		US dollars
		December 31,
(in thousands)		2020				2019
Deferred taxes
Provision for vacation, recreation and bad debt			1,894				1,180
Provision for other employee related obligations			1,400				1,193
Provision for deferred revenues/expenses and other obligations			4,292				4,631
Carry forward tax losses			551				-
Other temporary differences, net			1,279				514
			9,416				7,518

		US dollars
		December 31,
(in thousands)		2020				2019
Deferred income taxes included in long-term investments and other assets			11,910				10,385
Deferred income taxes included in long-term liabilities			(2,494	)			(2,867	)
			9,416				7,518

Schedule of Income Before Income Taxes

K. Income before income taxes is composed as follows:

		US dollars
		Year ended December 31,
(in thousands)		2020				2019				2018
The Company and its Israeli subsidiaries			38,469				27,045				46,138
Non-Israeli subsidiaries			(9,430	)			(3,841	)			30,095
			29,039				23,204				76,233

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Tabular disclosure of the components of income tax expense attributable to continuing operations for each year presented including, but not limited to: current tax expense (benefit), deferred tax expense (benefit), investment tax credits, government grants, the benefits of operating loss carryforwards, tax expense that results from allocating certain tax benefits either directly to contributed capital or to reduce goodwill or other noncurrent intangible assets of an acquired entity, adjustments of a deferred tax liability or asset for enacted changes in tax laws or rates or a change in the tax status of the entity, and adjustments of the beginning-of-the-year balances of a valuation allowance because of a change in circumstances that causes a change in judgment about the realizability of the related deferred tax asset in future years.

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Tabular disclosure of the reconciliation using percentage or dollar amounts of the reported amount of income tax expense attributable to continuing operations for the year to the amount of income tax expense that would result from applying domestic federal statutory tax rates to pretax income from continuing operations.

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